We are still enthusiastic about the long-term prospects of our portfolios, especially as interest rates remain low, corporate profits are healthy and valuations continue to be reasonable, explains John Buckingham, money manager, value investing expert and editor of The Prudent Speculator.
Memphis-based FedEx (FDX) is the world’s largest cargo airline and offers door-to-door package delivery services for consumers and businesses in more than 220 countries and territories.
Shares have tumbled over the past year as global trade concerns and slowing earnings growth (still projected to be at least 5% for each of the next three years) have tempered investor enthusiasm.
FedEx’s position is that slowing growth in the eurozone, China and other large economies are headwinds, while tariffs “represent a downside risk to FedEx’s economic outlook.”
The company will report fiscal Q3 results in three weeks (the quarter includes holiday shipping), with analysts presently expecting $3.19 in EPS and $17.7 billion of revenue.
At FedEx’s roadshow earlier this year, management highlighted long-term goals of 10%-15% EPS growth per year, a 10%+ operating margin, improved cash flows and increased returns to shareholders.
The last of which would improve upon the current 1.4% yield and $11.6 billion spent on share repurchases over the past five-plus years.
We think that FedEx is in a strong market-leading position and we believe that the threat that online retailing giant Amazon (AMZN) will truly build out its own package delivery business is overstated and very much already “in” the price of the stock. We like FedEx’s strong balance sheet and very inexpensive forward P/E of 11.
